Time Warner Entertainment Co. v. Six Flags Over Georgia

• Decision Date: 13 July 2000
• Docket Number: No. A00A0120.,A00A0120.
• Citation: 537 S.E.2d 397,245 Ga. App. 334
• Parties: TIME WARNER ENTERTAINMENT COMPANY, L.P. et al. v. SIX FLAGS OVER GEORGIA, LLC et al.
• Court: Georgia Court of Appeals

537 S.E.2d 397

245 Ga. App. 334

TIME WARNER ENTERTAINMENT COMPANY, L.P. et al. v. SIX FLAGS OVER GEORGIA, LLC et al.

No. A00A0120.

Court of Appeals of Georgia.

July 13, 2000.

Reconsideration Denied July 27, 2000.

Certiorari Denied January 18, 2001.

Chandler & Britt, Walter M. Britt, Buford, Alston & Bird, Ronald L. Reid, Atlanta, for appellants.

Butler, Wooten, Overby, Fryhofer, Daughtery & Sullivan, James E. Butler, Jr., George W. Fryhofer III, Atlanta, Cale H. Conley, Athens, Bondurant, Mixson & Elmore, H. Lamar Mixon, Michael B. Terry, Joshua F. Thorpe, Atlanta, Andersen, Davidson & Tate, Gerald Davidson, Jr., Lawrenceville, for appellees. ELLINGTON, Judge.

This appeal is from a jury verdict in favor of a limited partnership and its sole limited partner against the general partner which from 1991 through 1998 operated the partnership's business investment, the Six Flags Over Georgia theme park. Appellee Six Flags Over Georgia, LLC ("Flags") is the limited partnership which owns the park. Appellee Six Flags Fund, Ltd., L.P. ("Fund") is the partnership's sole limited partner and is comprised of individual investors.¹ Although appellant Six Flags Over Georgia, Inc. ("SFOG") was the named general partner corporate entity responsible for operating the park, appellees alleged that Time Warner Entertainment Company, L.P. ("TWE"), acting through and in concert with its subsidiaries SFOG, Six Flags Entertainment Corporation ("SFEC"), and Six Flags Theme Parks, Inc. ("SFTP"), assumed the role of general partner and directed the activities of the partnership. The complaint² alleged, in essence, that the general partner damaged the appellees by preferring its own financial interest over that of the partnership and of the limited partner. The jury returned a verdict in favor of the appellees, awarding a total of $197,296,000 in compensatory damages and $257,000,000 in punitive damages.³ Appellants contend they are entitled to a new trial because (1) the trial court should have directed a verdict in favor of certain "non-partner defendants"; (2) the court should have directed a verdict in appellants' favor on appellees' "capital improvements" claim; (3) the evidence of breach of fiduciary duty was insufficient to support the jury's verdict; (4) the court erred in admitting or excluding certain evidence; (5) the court impermissibly impugned defense witnesses in the jury's presence; (6) the court erred in giving certain jury charges; (7) compensatory damages were either speculative or excessive; and (8) punitive damages were either unwarranted or excessive. Finding no reversible error, we affirm.

Viewed in the light most favorable to support the jury's verdict, the record reveals the following relevant facts: Flags, the partnership which owns the Six Flags Over Georgia theme park, has existed since 1967. The park, much like its sister park in Texas, was developed as a limited partnership comprised of a limited partner investor and a general partner park operator. The rights and responsibilities of the partners were set out in a written agreement which was amended in 1973. The agreement provided that the general partner had "exclusive control of the management of the business and affairs of the limited partnership" and would receive, among other compensation, 70 percent of the park's net cash flow. The partnership agreement also required the general partner to make certain "minimum" capital improvements each year. The 30-year partnership agreement expired on December 31, 1997. When the agreement ended, ownership of the park reverted wholly to the limited partner, Fund, which could then elect to sell the park or to entertain bids from prospective general partners that wished to enter a new partnership agreement. Appellees' principal witness, Avram Salkin, a Fund investor and signatory on the partnership agreement, has acted as Fund's representative for the last 30 years.

In 1990, TWE executives investigated acquiring all seven of the Six Flags theme parks and marketing them as "a national brand." In 1990, TWE bought nineteen percent, with an option to buy an additional thirty percent, of the stock of Six Flags Corporation (SFTP's predecessor), the company which owned five of the Six Flags theme parks and controlled the Georgia and Texas parks' general partner corporations. TWE executive Bob Pittman, the "architect" of the Six Flags deal, pitched the idea of acquiring Six Flags Corporation to the Time Warner, Inc. Board of Directors in July 1991. On December 26, 1991, TWE exercised its option and bought a controlling interest in SFTP, which owned SFOG, the named general partner of the Georgia park. Pittman, who was president of Time Warner Enterprises, a division of TWE, then became chairman of the board and CEO of SFEC, the TWE subsidiary which owned SFTP. He held those positions until 1995 when he left TWE for America Online. Pittman admitted that "as president of Time Warner Enterprises or Six Flags Entertainment, we were making decisions about the Georgia Park."

As early as February 19, 1991, months before TWE acquired controlling interest in the parks, Pittman began negotiating with the Coca-Cola Company to sell it the exclusive right to market Coca-Cola products at all seven Six Flags theme parks. A confidential agreement dated November 27, 1991, made the Coca-Cola deal contingent upon TWE acquiring a controlling interest in SFTP. The agreement was signed by Pittman as CEO of Time Warner Enterprises and by a Coca-Cola executive. In exchange for the promised sale of these rights, TWE received a one-time $20 million "sponsorship fee" or "marketing advance." On December 26, 1991, TWE used these funds and funds from other sources to exercise its option and buy the additional 30 percent of SFTP stock and controlling interest of the company. On that same date, Coca-Cola and SFEC executed a final marketing agreement. Salkin was not informed that this Flags asset had been sold until 1995, and when he asked to see the Coca-Cola agreement, he was told it was confidential. Flags never received its $2.8 million share of the $20 million fee.

In April 1992, Salkin was invited to meet with Pittman and other TWE and SFEC executives. Pittman immediately wanted to discuss buying out the Georgia theme park. Of course, Salkin could not simply negotiate a sale; he was required by his agreement with Fund investors to "shop" the park to the highest bidder when the partnership agreement expired. When TWE, Flags, and Fund representatives met again in October 1992, Pittman presented a $150 million plan for the Georgia park which included building a hotel and an island. According to Salkin, however, Pittman conditioned the plan upon "some type of a deal," and hinted that if Fund and Flags did not cooperate, TWE would build a competing park and would not make capital investments in new thrill rides for the Georgia park. Salkin said Pittman told him that TWE was "not interested in being in the business of managing assets for others."

A year after this meeting, Time Warner, Inc. executives contacted a real estate broker with Cushman & Wakefield's Atlanta office to discuss acquiring land in Georgia. Although the broker met with a Time Warner, Inc. executive, he was retained by SFTP to purchase land as a nominee and to keep the name of the actual buyer confidential. The broker's commissions were paid by SFTP. He was not authorized to discuss any of the land transactions with Salkin or representatives of Fund or Flags.

The broker acquired 13.7 acres of land immediately adjacent to the Georgia park for $1.8 million. On behalf of Time Warner, Inc., the closing papers were signed by Senior Vice President Paul McNicol. The purchase of this property effectively bounded the Six Flags theme park between the Time Warner, Inc. parcels, the Chattahoochee River, and Interstate 20, thus limiting the park's expansion opportunities. The broker was also later told to find a 600- to 700-acre tract of land 40-60 miles from Atlanta and to refer to the project as the "Pennants Theme Park." On June 30, 1994, the broker went on a helicopter ride with Pittman and SFTP and SFOG executives to view land meeting the project criteria. The helicopter ride was paid for by Time Warner, Inc. and categorized as an expense for "development of [a] new park." Time Warner, Inc. authorized the broker to make offers on the land, which he did. Almost a year later, after negotiating potential sales and faxing counteroffers to Time Warner, Inc.'s lawyers, the broker was told to cease his efforts.

During this time, TWE also studied the feasibility of developing a competing park. Stephen Ross, Bob Daly, and Terry Semel— executives with TWE's Warner Brothers division, who in April 1995 succeeded Pittman as the primary decision-makers for the general partner—hired Harrison Price Company to evaluate building a theme park within 100 miles of Atlanta. The evaluation was done using confidential business information from the Six Flags Over Georgia park. Although no competing theme park was ever built, TWE executives did draft a plan dated October 2, 1996, which outlined spending $12 million on capital improvements for the proposed park every third year and $5 million for each of the two years in between. From 1991 through 1996, TWE never caused during any one year $5 million to be spent on capital improvements at the Georgia park, even though all capital expenditures would come from the park's surplus operating cash.

In late 1995 and early 1996, Salkin began the task of shopping the park by visiting competitors' theme parks to evaluate them as prospective bidders for general partner. According to Salkin, he learned that major capital investments, particularly in new thrill rides, was the key factor that drove attendance and profits at the parks. When Salkin toured the Georgia park in May 1996, he discovered that the park's operators had been asking the...